China Plans Third Capital Market Swap Operation as 31 Firms Seek More Than CNY100 Billion

A larger pool of firms seeks funding for stock investment

The People's Bank of China will conduct its third Securities, Funds and Insurance Companies Swap Facility operation on November 3, 2026, after 31 securities firms and fund management companies applied for more than CNY100 billion. The swaps will run for one year and may be extended.

The central bank announced the operation on November 2 as financial regulators prepared a wider package of support for China's capital markets. Alongside the new swaps, authorities outlined cheaper central bank funding for loans used to buy shares, broader participation by financial institutions and possible changes to share repurchase rules.

The applications exceed the CNY50 billion allocated in the first swap operation in October 2024 and the CNY55 billion allocated in January 2025. Together, those earlier operations supplied CNY105 billion, almost as much as the minimum amount now being sought in a single round.

The facility works through financial institutions rather than individual investors. Eligible firms exchange assets they hold for government bonds or central bank bills that are easier to use to raise money. They can then obtain financing for stock purchases, investments in stock exchange traded funds, or market making, which involves regularly offering to buy and sell securities.

The November 3 auction will determine the amount allocated and the swap fee. Applications are the first step: participating firms must receive their allocations, arrange financing and put the resulting money to work before the operation produces additional buying in the market.

For investors, the immediate development is a larger group of institutions seeking access to a financing channel intended to remain available during periods of market stress. For securities firms and fund managers, the practical benefit is the ability to raise money against existing holdings while retaining room to manage their portfolios.

How the swap turns existing assets into financing

The SFISF accepts eligible collateral including bonds, stock exchange traded funds and shares belonging to the CSI 300, an index of major companies listed in Shanghai and Shenzhen. An exchange traded fund, or ETF, holds a basket of investments and trades on an exchange like a share.

The central bank supplies highly liquid assets in exchange, including government bonds and central bank bills. Liquid assets are those that can readily be sold or used to obtain financing. Participating firms can use them in market transactions, such as repurchase agreements, to raise cash.

A repurchase agreement is a short financing arrangement in which securities are sold with an agreement to buy them back later. The financing obtained through the swap mechanism is directed toward stock investment, stock ETFs and market making.

The one year term gives institutions a longer planning period than financing that must be renewed frequently. Extensions offer another source of flexibility. At the November 2 regulatory meetings, authorities said the existing swaps had already been extended several times, with the outstanding balance standing at CNY105 billion.

Participation expands beyond the first two auctions

Each of the first two operations attracted 20 bidding institutions. The 31 applicants for the third round represent an increase of 11, or 55%, compared with participation in either earlier auction.

The China Securities Regulatory Commission said 28 different securities firms and fund management companies had participated across the first two rounds by the end of October. Some institutions therefore took part in both. The latest applicant count covers securities firms and fund managers, although insurance companies also fall within the facility's eligible categories.

Dong Ximiao, chief economist at Merchants Union Consumer Finance, said expanding access would give more financial institutions outside the banking sector a stable funding channel. He said participation in the earlier rounds had been relatively narrow, leaving some smaller securities firms and funds with less access to support.

The regulator said it would press participating firms to strengthen compliance and risk controls while using their investment capabilities to help stabilize the market. Institutions attending the policy discussions indicated that, following successful applications, they intended to direct additional funds into capital market investments promptly.

From the 2024 announcement to the third operation

PBOC Governor Pan Gongsheng announced the swap facility on September 24, 2024, alongside a separate relending program supporting share repurchases and purchases by major shareholders. The central bank formally established the swap facility on October 18, with an initial program size of CNY500 billion and scope for expansion.

The operations and subsequent policy discussions followed this sequence:

• September 24, 2024: Pan announced the two capital market monetary policy tools.
• October 18, 2024: The PBOC formally established the swap facility.
• October 21, 2024: The first operation allocated CNY50 billion at a winning fee rate of 20 basis points.
• January 2, 2025: The second operation allocated CNY55 billion at a winning fee rate of 10 basis points.
• November 2, 2026: Regulators held meetings on both tools, and the PBOC announced the third swap operation.
• November 3, 2026: The new operation is scheduled to take place with a one year term and possible extension.

The initial CNY500 billion program size describes the facility's announced capacity. The CNY105 billion from the first two operations describes the amount actually allocated through those auctions.

Fees and the pace of investment will shape the effect

The swap fee fell by half between the first two operations, from 20 basis points to 10 basis points. A basis point is one hundredth of a percentage point, so those rates equal 0.20% and 0.10%.

At the November 2 meetings, the PBOC, the National Financial Regulatory Administration and the CSRC said they would increase participation, lower swap fees as appropriate and improve collateral and operating arrangements. The winning fee for the November 3 auction had not been announced.

Xu Chi, chief strategy analyst at Zhongtai Securities, said the renewed operation came amid repeated market declines and greater financing pressure in technology and growth stocks. He described the mechanism as a way to turn institutions' existing assets into additional financing capacity when falling markets make obtaining funds more difficult.

Xu said the practical effect would depend on the final allocation, the fee and how quickly firms converted their new financing capacity into purchases. His assessment places the focus on the steps after the auction, when institutions decide how much to invest and where.

Earlier operations supported CNY82 billion in purchases

The PBOC's monetary policy implementation report for the first quarter of 2025 recorded CNY105 billion in cumulative swap operations by the end of March. The facility had supported 28 institutions in increasing their stock and ETF holdings by about CNY82 billion.

The CNY82 billion in purchases was equivalent to roughly 78% of the CNY105 billion allocated. The figures give a concrete measure of investment associated with the earlier operations, alongside the financing capacity the facility supplied.

Xu said use of the mechanism increased during periods of market pressure, including November 2024, early 2025 and the overseas tariff shock in April 2025. He also pointed to a need for buying to continue after an initial stabilization, particularly in areas experiencing the greatest financing strain.

Technology shares, companies listed on the ChiNext market and smaller companies were among the areas he identified. He said sustained inflows into funds tracking the STAR 50 and CSI 1000 over two or three trading sessions would be a useful sign that support was reaching those parts of the market.

Share purchase lending becomes a lasting policy

The November 2 meetings also changed the companion relending program for share repurchases and purchases by major shareholders. Authorities said it would move from a temporary measure to a lasting institutional arrangement, with the central bank relending rate falling from 1.25% to 1%.

Relending means the central bank supplies funding to financial institutions, which then lend to eligible borrowers. Banks will set their customer loan rates by adding a commercially determined margin to the central bank funding rate.

Authorities put signed loan agreements under the share purchase program at about CNY440 billion, with more than CNY280 billion already disbursed. The CSRC separately said 902 listed companies had disclosed 1,110 announcements concerning loans for repurchases or shareholding increases by the end of October.

The regulator put the combined upper limit of requested loans at about CNY440 billion when applications by China Reform Holdings and China Chengtong Holdings were included. Requested limits, signed agreements and disbursed loans describe different stages of the lending process.

The two tools reach the market through different borrowers. The swap facility supports securities firms, funds and eligible insurers. The relending program supports financing for companies buying back shares and major shareholders increasing their stakes.

Regulators prepare changes to share repurchase rules

Chinese listed companies had already increased their repurchase activity before the latest announcements. During the first 10 months of 2026, 645 companies in Shanghai and Shenzhen disclosed 700 repurchase plans worth CNY237.7 billion, according to the CSRC.

Plans to repurchase and cancel shares accounted for CNY115 billion, close to half of the planned amount. Separately, 747 companies carried out CNY134.5 billion in actual repurchases. Cancellation removes repurchased shares from circulation, reducing the number of shares outstanding.

The CSRC said the value of both announced plans and completed repurchases from 2024 through October 2026 was 50% higher than during 2021 to 2023. It also described the 2026 figures for planned repurchases, completed purchases and cancellation measures as records.

The regulator proposed allowing repurchases intended to protect company value when a share price falls below its issue price. Other proposals would remove the requirement that a company be listed for at least six months before using that type of repurchase and permit orders during opening and closing call auctions.

Further proposals concern stronger enforcement of share price stabilization commitments for companies within 36 months of listing, repurchases by companies holding funds raised above their original targets, and dedicated repurchase funds supported by specified portions of relevant company resources. The CSRC said it would revise the Listed Company Share Repurchase Rules following further study.

New funds and margin financing add other channels

The CSRC also outlined progress on actively managed ETFs. Unlike an ETF designed to follow a particular index, an active ETF lets a fund manager choose securities and adjust investments using their own research and judgment.

The first 18 products were registered on October 19, 2026, and began fundraising on October 23. By November 2, they had raised more than CNY35 billion. Sixteen had reached their individual CNY2 billion fundraising caps and closed subscriptions.

The regulator said it would encourage the funds to begin investing promptly. It also planned to support more stock index ETFs, examine funds maintaining fixed proportions of stocks and bonds, and encourage funds with variable fees that more closely connect managers' compensation with investor outcomes.

Margin financing is another area under review. Investors use it to borrow from securities firms to buy investments, providing cash or eligible securities as collateral. In January 2026, the Shanghai, Shenzhen and Beijing exchanges raised the margin requirement from 80% to 100% to contain the buildup of borrowing risks.

The CSRC said financing balances and trading activity had since declined. It would work with exchanges and securities firms to review margin requirements, the collateral value assigned to eligible securities and maintenance requirements. Its stated aim was to release some financing capacity while keeping risks manageable.

What to Know

• The PBOC scheduled its third swap operation for November 3, 2026, with a one year term and possible extension.
• Thirty one securities firms and fund managers applied for more than CNY100 billion.
• The first two operations allocated CNY105 billion and supported about CNY82 billion in stock and ETF purchases by March 2025.
• Authorities plan broader participation and lower swap fees as appropriate.
• The separate share purchase relending program will become a lasting arrangement, with its central bank funding rate reduced to 1%.
• Proposed repurchase rule changes, new active ETFs and a review of margin financing form other parts of the market support effort.